Microeconomics: Principles, Applications, and Tools (8th Edition)

Published by Prentice Hall
ISBN 10: 0-13294-886-9
ISBN 13: 978-0-13294-886-9

Chapter 16 - External Costs and Environmental Policy - Exercises - 16.3 Traditional Regulation - Page 374: 3.8a

Answer

9 songs

Work Step by Step

Janis's willingness to pay per song decreases by \$1 for each additional song: 1st song: \$9 2nd song: \$8 3rd song: \$7 4th song: \$6 5th song: \$5 6th song: \$4 7th song: \$3 8th song: \$2 9th song: \$1 10th song: \$0 Since songs are free, Janis will play 9 songs, stopping when her marginal benefit reaches zero. Plot WTP on the vertical axis vs number of songs on the horizontal axis. Price = \$0 is a horizontal line. All songs with WTP above \$0 are chosen.
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